Shire Delivers Product Sales Growth of 6% and Continues to Execute Against Key Priorities in Q3 2018

November 1, 2018

Delivered product sales of $3.8 billion; growth driven by Immunology, recently-launched products, and international expansion

Received U.S. Food and Drug Administration and Health Canada approval for TAKHZYRO (lanadelumab-flyo) and launched in the U.S.

Accelerated debt pay-down through proceeds from the $2.4 billion sale of the Oncology franchise and strong net operating cash flow

November 1, 2018 – Shire plc (Shire) (LSE: SHP, NASDAQ: SHPG), the leading global biotech company focused on rare diseases, announces unaudited results for the three months ended September 30, 2018.

Flemming Ornskov, M.D., M.P.H., Shire Chief Executive Officer, commented:

“We continue to deliver solid growth and pay down our debt while advancing our late-stage pipeline. Our focus on commercial execution led to 6% growth in product sales to $3.8 billion in the third quarter overcoming foreign exchange headwinds. Our growth was once again driven by our Immunology franchise, recently-launched products, and expansion in international markets. Proceeds from the sale of our Oncology franchise coupled with strong free cash flow allowed us to reduce net debt by $3.9 billion year to date.

“We recently launched TAKHZYRO, the first monoclonal antibody to prevent hereditary angioedema (HAE) attacks, in the U.S. We also gained approval for this innovative treatment in Canada and received a positive opinion from the Committee for Medicinal Products for Human Use (CHMP) recommending marketing authorization in Europe.

“Takeda’s proposed acquisition of Shire remains on track to close in H1 2019, subject to shareholder approval of both companies and additional regulatory approvals. While integration planning is ongoing, our solid performance through the third quarter of 2018 demonstrates our continued focus on delivering for patients and executing against our key priorities.”

Financial Highlights	Q3 2018⁽¹⁾	Reported Growth⁽¹⁾	Non GAAP CER⁽¹⁾⁽²⁾
Product sales	$3,753 million	+6%	+7%
Total revenues	$3,872 million	+5%	+6%

Operating income from continuing operations	$956 million	+35%
Non GAAP operating income⁽²⁾	$1,475 million	-2%	-1%

Net income margin⁽³⁾⁽⁴⁾	14%	-1ppc
Non GAAP EBITDA margin^(2)(3)(4)	42%	-2ppc

Net income	$537 million	-2%
Non GAAP net income⁽²⁾	$1,119 million	-3%

Diluted earnings per ADS⁽⁵⁾	$1.75	-3%
Non GAAP diluted earnings per ADS⁽²⁾⁽⁵⁾	$3.64	-4%	-4%

Net cash provided by operating activities	$858 million	-19%
Non GAAP free cash flow⁽²⁾	$971 million	+8%

⁽¹⁾ Results include the Oncology franchise until the date of its sale on August 31, 2018.
⁽²⁾ The Non GAAP financial measures included within this release are explained on pages 27 – 28, and are reconciled to the most directly comparable financial measures prepared in accordance with U.S. GAAP on pages 19 – 22.
⁽³⁾ Percentage point change (ppc).
⁽⁴⁾ Calculated as a percentage of total revenues.
⁽⁵⁾ Diluted weighted average number of ordinary shares of 921.1 million.

Product sales growth

All franchises demonstrated product sales growth on a Non GAAP constant exchange rate basis, excluding Oncology which was sold during the quarter.
Encouraging early trajectory of TAKHZYRO since U.S. launch on August 23, 2018 with $51 million in initial launch stocking.
Growth of recently-launched products of 45%, primarily due to TAKHZYRO, ADYNOVATE, CUVITRU, and XIIDRA.

Operating performance

Generated Non GAAP diluted earnings per ADS of $3.64, a decrease of 4%, as product sales growth and operating expense discipline were offset by unfavorable foreign exchange, lower gross margins, and unrealized losses on equity investments.
Reported Non GAAP EBITDA margin of 42%, a slight decline from Q3 2017, primarily due to lower gross margins, as Q3 2017 reflected favorability from the timing of changes in the costs to manufacture certain products, partially offset by ongoing cost discipline and operating expense synergies.

Cash flow

Proceeds from the sale of our Oncology franchise and strong free cash flow during the year enabled a $3,915 million reduction in Non GAAP net debt since December 31, 2017.

FINANCIAL SUMMARY - THIRD QUARTER 2018 COMPARED TO THIRD QUARTER 2017

Revenues

Delivered total revenues of $3,872 million representing growth of 5%.
Product sales increased 6% to $3,753 million (Q3 2017: $3,534 million), driven by Immunology, up 12%, Neuroscience, up 6%, Genetic Diseases, up 6%, Internal Medicine, up 10%, and Ophthalmics, up 21%.
Royalties and other revenues decreased 27% to $119 million (Q3 2017: $164 million), primarily due to certain royalty expirations, the reclassification of ADDERALL XR from royalty revenue to product sales, and other changes as required under the new revenue accounting standard.

Operating results

Operating income increased 35% to $956 million (Q3 2017: $709 million), due to the gain on the sale of Shire's Oncology franchise and lower integration and acquisition costs, partially offset by increased reorganization costs.
Non GAAP operating income decreased 2% to $1,475 million (Q3 2017: $1,498 million), primarily due to lower gross margins as Q3 2017 reflected favorability from the timing of changes in the costs to manufacture certain products.
Non GAAP EBITDA margin was slightly down to 42% (Q3 2017: 44%), primarily due to lower gross margins partially offset by ongoing cost discipline and operating expense synergies.

Earnings per share (EPS)

Diluted earnings per American Depository Share (ADS) decreased 3% to $1.75 (Q3 2017: $1.81), primarily due to increased reorganization costs and income taxes, offset by the gain on the sale of Shire's Oncology franchise.
Non GAAP diluted earnings per ADS decreased 4% to $3.64 (Q3 2017: $3.81) as product sales growth and operating expense discipline were offset by unfavorable foreign exchange, lower gross margins, and unrealized losses on equity investments.

Cash flows

Net cash provided by operating activities decreased 19% to $858 million (Q3 2017: $1,055 million), driven by a $251 million contingent consideration payment to former shareholders of Dyax Corp. due to the approval of TAKHZYRO.
Non GAAP free cash flow increased 8% to $971 million (Q3 2017: $901 million). Non GAAP free cash flow includes capital expenditures of $203 million (Q3 2017: $174 million) and excludes payments relating to milestone and license arrangements of $316 million (Q3 2017: $20 million).

Debt

Non GAAP net debt as of September 30, 2018 decreased $3,915 million since December 31, 2017, to $15,154 million (December 31, 2017: $19,069 million). A combination of proceeds from the sale of Shire's Oncology franchise, Non GAAP free cash flow, and existing cash balances were utilized to repay debt during the year. Non GAAP net debt represents aggregate long and short term borrowings of $14,980 million, and capital leases of $367 million, partially offset by cash and cash equivalents of $193 million.

OUTLOOK

Our 2018 guidance, presented in the table below, has been updated to adjust for the sale of our Oncology franchise, which closed on August 31, 2018. Similarly, our projected 2020 revenue target has been updated to $16.5 - $17.5 billion, reflecting the removal of $0.5 billion of Oncology sales in our original projection. We continue to expect to achieve mid-forties Non GAAP EBITDA margin by 2020, which remains unchanged after considering the impact of the sale of our Oncology franchise.

Our Non GAAP diluted earnings per ADS outlook assumes a weighted average number of 917 million fully diluted ordinary shares outstanding for 2018.

Our U.S. GAAP diluted earnings per ADS outlook reflects anticipated amortization, integration, acquisition, and reorganization costs, as well as the gain on sale of our Oncology franchise and the impact from debt repurchase.

Risks associated with this outlook include the potential uncertainty resulting from the announcement by Takeda Pharmaceutical Company Limited (Takeda) on May 8, 2018 of a recommended offer for Shire under the U.K. Takeover Code.

Full Year 2018	U.S. GAAP Outlook	Non GAAP Outlook⁽¹⁾
Total revenue⁽²⁾	$15.3 - $15.8 billion	$15.3 - $15.8 billion
Diluted earnings per ADS⁽³⁾	$7.17 - $7.77	$14.77 - $15.37

⁽¹⁾ For a list of items excluded from Non GAAP Outlook, refer to pages 27 - 28 of this release.
⁽²⁾ Management is providing guidance for total revenue. Total revenue is comprised of total product sales and royalties & other revenues. Pursuant to a change in U.S. GAAP related to accounting for revenue, certain revenue formerly classified as royalties are now recorded as product sales.
⁽³⁾ See page 22 for a reconciliation between U.S. GAAP diluted earnings per ADS and Non GAAP diluted earnings per ADS.

RECENT DEVELOPMENTS

Corporate

The acquisition of Shire by Takeda is expected to close in H1 2019, subject to receipt of additional regulatory clearances and approval by the shareholders of both companies. Takeda has already received clearances from regulatory agencies in the U.S., Japan, China, and other countries and is in discussions with the European Commission as part of its Phase 1 review of the proposed acquisition.

Business Development

Sale of Oncology franchise

On August 31, 2018, Shire announced it had completed the sale of its Oncology franchise to Servier S.A.S. (Servier) for $2.4 billion. The franchise included the global rights to ONCASPAR and ex-U.S. and ex-Taiwan rights to ONIVYDE, as well as Oncology pipeline assets.

Acquisition of sanaplasma AG

On September 6, 2018, Shire announced the acquisition of sanaplasma AG, a source plasma collection company headquartered in Switzerland. Sanaplasma AG adds 14 new centers in the Czech Republic and Hungary to Shire’s European-based plasma collection network.

Financing

On September 11, 2018, Shire completed a $2.3 billion cash tender offer to repurchase certain of its outstanding senior notes. The tender offer was funded from the proceeds of the sale of its Oncology franchise.

Products

TAKHZYRO, a first-of-its-kind monoclonal antibody (mAb) preventive treatment for HAE

On August 23, 2018, Shire announced that the U.S. Food and Drug Administration (FDA) had approved TAKHZYRO injection, for prophylaxis to prevent attacks of HAE in patients 12 years of age and older.
On September 20, 2018, Shire announced that Health Canada had authorized TAKHZYRO for routine prevention of attacks of HAE in patients 12 years of age and older.
On October 19, 2018, Shire announced that the CHMP of the European Medicines Agency (EMA) had issued a positive opinion recommending the granting of marketing authorization in the European Union (EU) for lanadelumab for the prevention of HAE attacks.

FIRAZYR for the treatment of HAE attacks in Japan

On September 21, 2018, Shire announced that the Ministry of Health, Labour and Welfare in Japan had granted manufacturing and marketing authorization for FIRAZYR, for the acute treatment of HAE attacks in adult patients with HAE.

VEYVONDI, for adults with von Willebrand disease (VWD)

On September 12, 2018, Shire announced that the European Commission had granted Marketing Authorization for VEYVONDI, for the treatment of bleeding events and treatment/prevention of surgical bleeding in adults (age 18 and older) with VWD when desmopressin treatment alone is ineffective or not indicated.

INTUNIV, for the treatment of attention deficit hyperactivity disorder (ADHD) in adults

On August 13, 2018, Shire announced that its partner in Japan, Shionogi & Co., Ltd had submitted a New Drug Application (NDA) for the manufacture and marketing in Japan of INTUNIV.

Pipeline

Prucalopride (SHP555) for the treatment of chronic idiopathic constipation (CIC)

On October 18, 2018, Shire announced that the FDA Gastrointestinal Drugs Advisory Committee voted unanimously that the risk-benefit profile of prucalopride supports the approval of this NDA, which has a Prescription Drug User Fee Act (PDUFA) date of December 21, 2018.

Facilities

On October 25, 2018, Shire announced it had filed a second submission to the FDA for approval to manufacture albumin therapy at its new plasma manufacturing facility near Covington, Georgia.

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Dial in details for the live conference call for investors at 14:00 GMT / 10:00 EDT on November 1, 2018:

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The quarterly earnings presentation will be available today at 13:00 GMT / 9:00 EDT on:

- Shire.com Investors section

- Shire's IR Briefcase in the iTunes Store

NOTES TO EDITORS

Stephen Williams, Deputy Company Secretary, is responsible for arranging the release of this announcement.

Inside Information

This announcement contains inside information.

About Shire

Shire is the global biotechnology leader serving patients with rare diseases and specialized conditions. We seek to push boundaries through discovering and delivering new possibilities for patient communities who often have few or no other champions. Relentlessly on the edge of what’s next, we are serial innovators with a diverse pipeline offering fresh thinking and new hope. Serving patients and partnering with healthcare communities in over 100 countries, we strive to be part of the entire patient journey to enable earlier diagnosis, raise standards of care, accelerate access to treatment, and support patients. Our diverse portfolio of therapeutic areas includes Immunology, Hematology, Genetic Diseases, Neuroscience, Internal Medicine, and Ophthalmics.

Championing patients is our call to action - it brings the opportunity - and responsibility - to change people’s lives.

www.shire.com

THE “SAFE HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Statements included herein that are not historical facts, including without limitation statements concerning future strategy, plans, objectives, expectations and intentions, projected revenues, the anticipated timing of clinical trials and approvals for, and the commercial potential of, inline or pipeline products, are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, Shire’s results could be materially adversely affected. The risks and uncertainties include, but are not limited to, the following:

Shire’s products may not be a commercial success;
increased pricing pressures and limits on patient access as a result of governmental regulations and market developments may affect Shire’s future revenues, financial condition and results of operations;
Shire depends on third parties to supply certain inputs and services critical to its operations including certain inputs, services and ingredients critical to its manufacturing processes. Any disruption to the supply chain for any of Shire’s products may result in Shire being unable to continue marketing or developing a product or may result in Shire being unable to do so on a commercially viable basis for some period of time;
the manufacture of Shire’s products is subject to extensive oversight by various regulatory agencies. Regulatory approvals or interventions associated with changes to manufacturing sites, ingredients or manufacturing processes could lead to, among other things, significant delays, an increase in operating costs, lost product sales, an interruption of research activities or the delay of new product launches;
the nature of producing plasma-based therapies may prevent Shire from timely responding to market forces and effectively managing its production capacity;
Shire has a portfolio of products in various stages of research and development. The successful development of these products is highly uncertain and requires significant expenditures and time, and there is no guarantee that these products will receive regulatory approval;
the actions of certain customers could affect Shire’s ability to sell or market products profitably. Fluctuations in buying or distribution patterns by such customers can adversely affect Shire’s revenues, financial conditions or results of operations;
failure to comply with laws and regulations governing the sales and marketing of its products could materially impact Shire’s revenues and profitability;
Shire’s products and product candidates face substantial competition in the product markets in which it operates, including competition from generics;
Shire’s patented products are subject to significant competition from generics;
adverse outcomes in legal matters, tax audits and other disputes, including Shire’s ability to enforce and defend patents and other intellectual property rights required for its business, could have a material adverse effect on Shire’s revenues, financial condition or results of operations;
Shire may fail to obtain, maintain, enforce or defend the intellectual property rights required to conduct its business;
Shire faces intense competition for highly qualified personnel from other companies and organizations;
failure to successfully execute or attain strategic objectives from Shire’s acquisitions and growth strategy may adversely affect Shire’s financial condition and results of operations;
Shire’s growth strategy depends in part upon its ability to expand its product portfolio through external collaborations, which, if unsuccessful, may adversely affect the development and sale of its products;
a slowdown of global economic growth, or economic instability of countries in which Shire does business, could have negative consequences for Shire’s business and increase the risk of non-payment by Shire’s customers;
changes in foreign currency exchange rates and interest rates could have a material adverse effect on Shire’s operating results and liquidity;
Shire is subject to evolving and complex tax laws, which may result in additional liabilities that may adversely affect Shire’s financial condition or results of operations;
if a marketed product fails to work effectively or causes adverse side effects, this could result in damage to Shire’s reputation, the withdrawal of the product and legal action against Shire;
Shire is dependent on information technology and its systems and infrastructure face certain risks, including from service disruptions, the loss of sensitive or confidential information, cyber-attacks and other security breaches or data leakages that could have a material adverse effect on Shire’s revenues, financial condition or results of operations;
Shire faces risks relating to the expected exit of the United Kingdom from the European Union;
Shire incurred substantial additional indebtedness to finance the Baxalta acquisition, which has increased its borrowing costs and may decrease its business flexibility;
the potential uncertainty among our employees, customers, suppliers, and other business partners resulting from the announcement by Takeda Pharmaceutical Company Limited on May 8, 2018 of a recommended offer for Shire under the U.K. Takeover Code; and

a further list and description of risks, uncertainties and other matters can be found in Shire’s most recent Annual Report on Form 10-K and in Shire’s subsequent Quarterly Reports on Form 10-Q, in each case including those risks outlined in “ITEM 1A: Risk Factors”, and in subsequent reports on Form 8-K and other Securities and Exchange Commission filings, all of which are available on Shire’s website.

All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. Except to the extent otherwise required by applicable law, we do not undertake any obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.